08/23/2006
Consumer-directed plans may mitigate rising prices
Though health-care costs are on the rise, several consumer-directed health plans available today can help small-business owners and their employees take more control of their health-care dollars.
Consumer-directed plans include health savings accounts, health reimbursement arrangements and flexible spending accounts, and are designed to save employees money by encouraging them to be more involved in the decision-making process about their medical care.
According to the NFIB Research Foundation, the cost of providing health care for employees has ranked as the No. 1 concern of American small-business owners for the past two decades. While NFIB continues to press for passage of Small-Business Health Plan legislation to lower costs and provide greater access to care, these plans may help you manage your health-care costs today.
Review the following consumer-directed health plans to see if they can help you and your employees better manage your resources. Check with your insurance agent for details on plans like these, and whether they are applicable to your individual situation.
Health savings accounts
A health savings account is a tax-free savings plan that allows an employee to pay for current health-care costs while saving for future medical expenses. Participants are not penalized for using their HSA funds for qualified medical expenses, and may carry over any unused funds to the next year. Both employers and employees may contribute to an HSA.
A great benefit of an HSA is its portability--it can move with the employee in the event of a job change. And while HSAs must be accompanied by a high-deductible health plan, HDHPs still tend to cost less than traditional health-care options.
Health reimbursement arrangements
HRAs are employer-funded accounts that reimburse employees for qualified medical expenses. After employees have paid for such expenses out-of-pocket, they submit a claim and are reimbursed from money their employer designates for that purpose.
Because employees must pay for health-care costs up front, HRAs can serve as an incentive for responsible health-care spending. And though an HRA is similar to an HSA in that it requires an HDHP, employees cannot take their account with them if they change jobs.
Flexible spending accounts
Flexible spending accounts are designed to let employees save pre-tax dollars to use later for co-pays, deductibles and other medical expenses not covered under their main health-insurance plan.
FSAs are beneficial in that employees are able to use tax savings to pay for expenses that they otherwise would pay for with after-tax dollars. However, any money set aside but not used is returned to the employer. Because it can be difficult to predict out-of-pocket expenses for the coming year, many people choose not to take advantage of FSAs for fear of losing that money. NFIB supports H.R. 1998, the Flexible Spending Account Rollover Bill, which would allow up to $500 to be rolled over to the next year's FSA.
Get more information from NFIB on savings accounts for medical spending.
